Textbook Notes (362,870)
Economics (380)
ECO100Y5 (285)
Michael H O (131)
Chapter 3

# ECO100Y5Y Chapter 3 Notes.docx

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School
University of Toronto Mississauga
Department
Economics
Course
ECO100Y5
Professor
Michael H O
Semester
Fall

Description
Chapter 3 Notes Quantity Demanded - Amount of a good/service that consumers want to purchase during given time - It is a desired quantity - Quantity Demanded = refer to desired purchases - Quantity bought/ Quantity exchanged = refer to actual purchases - QD refers to flow of purchases express during period of time; 1 million units/day, 7 million/week - “QD of cars in Canada is 50’000” means nothing unless told the period of time involved - Factors o Price of product (movement) o Consumers income (shift) o Price of other goods (shift) o Taste/preference of consumer (shift) o Expectation of future (shift) o Number of buyers (shift) - Holding other variables constant = other things being equal/other things given Quantity Demanded and Price Law of Demand - Basic economic hypo: price of product and QD are negatively related, other things being equal Demand Schedules and Demand Curves - Demand schedule; a table showing relationship between quantity demanded and price of commodity, other things being equal - Demand curve; graphical representation of relationship between QD and price of commodity, other things being equal - Demand; entire relationship between quantity of commodity that buyers want, and price of that commodity, other things being equal Shifts in Demand Curve - Drawn with assumption that everything except price is held constant, a change in any other variable will shift curve to new position 1) Consumers’ Income o Good for which QD increases when income rises called normal goods o Good for which QD decreases when income rises called inferior goods o Change in distribution; increase in demand for products bought by consumers whose incomes increase, decrease in demand for products bought by consumers whose income decrease 2) Price of Other Goods o Substitutes; goods that can be used in place of another good to satisfy similar needs/desires o Complements; goods that tend to be consumed together  a fall in price of one will increase QD of both products 3) Taste/Preference o May be long-term (ex. typewriters to computers), or short-term (ex. Need for Speed game) 4) Expectations of Future o Can speed up decision to buy o Can urge consumers to hold decision for a later time Movements in Demand Curve - Change in Demand; change in quantity demanded at every price of commodity, represented by shift in whole demand curve - Change in QD; change in specific QD of good, represented by change from one point on demand curve to another point, either on original demand curve or on new one - Increase in Demand means whole demand curve shifts to right, at any given price o Increase in demand causes increase in QD - When there is change in demand and price, overall change in QD is net effect of shift in demand curve and movement along new demand curve Quantity Supplied - Amount of commodity that producers want to sell during given time period, flow (units/time) - Factors o Price of product (movement) o Price of input (shift) o Technology (shift) o Government tax or subsidies (shift) o Price of other products (shift) o Number of Suppliers (shift) Quantity Supplied and Price - The higher the product’s price, the more supply; if lower price, the less its producers will supply Supply Schedules and Supply Curves - Supply schedule; table showing relationship between QS and price of commodity, other things being equal - Supply curve; graphical representation of relationship between QS and price of commodity, other things being equal - Supply; entire relationship between quantity of some commodity that producers wish to sell and price of that commodity, other things being equal Shifts in Supply Curve - At each price there is a change in QS 1) Price of Input o Materials, labour, and machines are inputs o The
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